Asian currencies’ fall continues on Fed fear

Bloomberg

Asian currencies had a third weekly loss on concern that the US Federal Reserve will scale back stimulus that has spurred fund flows to emerging markets.

The Bloomberg-JPMorgan Asia Dollar Index touched a six-week low on Thursday after Fed Chairman Ben Bernanke on Tuesday said its US$85 billion a month of bond-buying may be tapered if the US economy shows a sustained improvement. The yuan reached a 19-year high on Friday as the People’s Bank of China set a record fixing even after data indicated that manufacturing in Asia’s largest economy will contract this month.

The Asia Dollar Index, which tracks the 10 most active currencies excluding the yen, fell 0.1 percent this week to 117.32.

In Taipei, the New Taiwan dollar was little changed on Friday and rose 0.1 percent this week to NT$30.030 compared with NT$30.060 on May 17.

NT dollar forwards saw their best week in a month as a plan to cut taxes on stock investments attracted global funds to local shares.

India’s rupee declined 1.4 percent to 55.6450 per US dollar, South Korea’s won dropped 0.9 percent to 1,127.05 and the Philippine peso fell 1 percent to 41.595. The yuan rose 0.17 percent to 6.1316.

The won had a third weekly decline, the longest losing streak since the period ending on March 22. Bank of Korea Governor Kim Choong-oo said on Friday a possible US exit from its stimulus program would cause volatility in other nations.

The Dollar Index, which tracks the greenback against the currencies of six major trading partners, touched a 2010 high on Thursday.

A preliminary reading of the China Purchasing Managers’ Index fell to 49.6 this month, according to HSBC Holdings PLC and Markit Economics. That compares with the 50.4 median estimate in a Bloomberg News survey. Fifty is the dividing line between expansion and contraction.

The Philippine peso saw its biggest decline since the five days ended on Aug. 17 last year. The drop is due to “dominant external factors,” including the China report and the Fed comments, Bangko Sentral ng Pilipinas Governor Amando Tetangco said on Friday.

The Chinese central bank raised the daily fixing 0.13 percent to 6.1867 per US dollar, a record since July 2005.

The yen rallied the most in a year against the US dollar as Fed officials gave conflicting signals on sustaining their bond-buying, while Japanese policymakers kept their unprecedented stimulus in place.

The yen advanced 1.9 percent to ￥101.31 per US dollar this week in New York, the biggest drop since the five days ended on June 1 last year. Against the euro, the Japanese currency gained 1.1 percent to ￥131.01. The greenback dropped 0.7 percent against the euro to US$1.2932, its first weekly decline since May 3.

Japan’s currency slid 17 percent in the past six months versus nine developed-nation counterparts tracked by Bloomberg Correlation-Weighted Indexes as Japanese Prime Minister Shinzo Abe pledged to stem 15 years of deflation and the Bank of Japan doubled monthly bond purchases. The euro rose 4 percent and the US dollar appreciated 4.3 percent.

Australia’s currency lost for a third week as commodities slumped, with the Standard & Poor’s GSCI Index of 24 raw materials sinking 1.2 percent and a gauge of Chinese factory output this month fell.